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tv   Capital News Today  CSPAN  March 8, 2011 11:00pm-2:00am EST

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that by march of 2011 we were going to have grown for six straight quarters and have added jobs for 12 straight months, spreads are going to be back to lower than they were before the financial crisis, i would have given you a kiss that is what we need to be doing. i feel like we have turned a very serious corner. parlay i base that on the business cycle data, that you observed every day. the gdp has turned around, the recession was over even before that. the blue chip survey keeps going up. in november 2010, not five months ago, the blue-chip for
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2011 was going to be 2.9%, and by this february that is raised to 3.5%. if you look at the purchasing managers, you got strong indicators that manufacturing is coming back on the expectations of jobs. it is the highest in decades. business confidence appears to be coming back by any of the measures, consumer confidence the highest in at least three or four years. separate from the data coming in on the stronger side, anecdotally, if you talk to business people, but closest they are to the cycle, the stronger their expectations for the coming 2011 and 2012. these durable-goods manufacturers, business equipment, high-tech sectors come historically cyclical, they
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have a strong this expectations. as you move toward the less cyclical industries, they are positive but milder. that feels like anecdotal evidence backs up -- backing of what is coming in from the business cycle data. the one exception is small business, which is historically quite a cyclical, one of the first to go down and one of the first to come back. they are lagging, not driving it. that is why that has been a policy area focus for us. the data suggests transition from phase 12 phase two. if you look at the labor market, obviously top of mine for a lot of folks, -- top of mind for a lot of votes, something happens
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that is under dispute, as bad as the gdp is doing, unemployment rises substantially more than anybody predicts. it was not just my predecessor predicting that the baseline unemployment rate was going to be lower than it ended up being. all of you made the same predictions and the private smith set -- in the private sector mistook what the baseline was going to be for unemployment. in the relationship of unemployment to gdp broke down from its historical basis. we had 1.5% to 2% more than what anyone would have predicted at the end of 2008. a major question as to why that happened. fundamentally those questions are around, are we going to get it back? will we see on the other sign
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better unemployment performance than the gdp would to the -- suggest? and with some of the dropping of the unemployment rate, is this sunday okens law residual come back? one dynamic is heavily to the negative in the recession, which is now turning to be substantially in the positive. in most recessions, productivity growth drops. sometimes it even goes negative. this downturn, the exact opposite occurred. for direct cost cutting or for whatever means, productivity growth was growing at astounding levels through the downturn. if some point, we have allies productivity growth rate to 5% or 6%. that is a recipe for a lot of
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people losing their jobs, and we were on the downside of that trend for some substantial period. that has almost entirely flipped. you have expectations of output at 3.5%, and you have productivity back to a board normal 2.5%. if they persist, that is a recipe for a lot of people getting their job back or a lot of people at work working substantially longer hours. that is a trend in the labor market that we continue to monitor, but suggest something positive developing. that is largely why you have seen modest at first but continuing to strengthen labor market performance. when i hear some people say jobless recovery the way the
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last two recoveries were jobless recoveries, in the early period, i object to that. it is not in fact accurate. the 2001 recession ended and there is job loss for 22 months after the declared end of the recession. that is a jobless recovery. in this recession, job growth commences nine months after the end of the recession. it is much more like a traditional recovery. the death of this whole -- and have to infer this in my mind -- this goes down, and the job loss from this recession is very much on the order of magnitude of the last three recessions combined. that is how deep it is. but we have now started to come back. that is very different from going down somewhat and then not
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generate any jobs for a long period. i think our most pressing problem as we transition to face to -- phase two is getting the growth rate sustained. also quite critical for getting the deficit down and dealing with our long run fiscal challenges, will which we have known about for 30 years, have not gone materially worse in the last two years. what got worse is the business cycle went down the tubes in the iran the deficit up to record amounts. the long run fiscal situation facing the country is oriented around the aging of the population, the acceleration of health care costs, and thinking about things like the share of income pain by high end,
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americans which is at very low levels, mostly due to major tax cuts over the last decade. if you ask where will the growth relocated, and there is an argument made by some that if we cannot restore consumer spending and if we cannot get construction back, where will the growth come from? i believe and i should have brought a copy of our economic report to the president. i did not realize that you're sitting near the table. ok. the economic report of the president, the very first graph lays out what is wrong with that reasoning. if you compare the boom of the 2000 cost to previous recoveries, it is highly unusual, in two ways. number one, it is massively way to the to consumers -- weighted
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to consumer spending. way more than in previous booms in the united states. it is undersized for export growth in business investment. exports and business investments are traditionally drivers of recoveries, but not in the 2000's. when people say, if we do not have a rapid increase in consumer spending and a big upturn in residential construction, we cannot have a recovery, they are leaving out the phrase, like we had in the 2000's. but it was not sustainable. consumption grew faster than income growth, and they brought the saving rates of the nation down to 0%. that is not sustainable. residential construction fueled
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by a housing bubble is not sustainable. that is not where we're trying to get back to. in my view, the growth will be located in business investment, exports, traditional business cycle recovery, and we wanted to be like a traditional recovery, a heavy dose of small business expansion. entrepreneurship, that part has been relatively weak. exports are up 17% over the last year. that is fantastic. that is well on the way to meeting the president's goal, and it could double as -- to double exports over five years. business investment has been up strongly in various quarters and we continue monitoring that. the one industrial production number, durable-goods in january, it was not as strong.
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but that follows a very strong months. exports, investments, hopefully small business, which is why we passed the credit bill, has put the focus on start of america. it is a focus on public/private to start and grow businesses. things that in the old equation, we want the focus on. physical capital, human capital, and others. nobody in the white house wants to hear about human capital accumulation, physical capital accumulation, and productivity enhancement. but when the press this is out educate, out innovate, and out build the rest of the world. it has a economic foundation.
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it comes out of that model. i think a growth agenda is what is warranted. when we are talking about when the future, we're talking about rooted in a business cycle driven by exports, by raising the skill level of our workforce, and to me, that is the private sector sustainable kind of growth. let us talk about the deficit in the issues of debt facing the economy. as all of you know, what matters is our debt to gdp level. and what matters is, as the bulls-sensing commission observed, not 2011 -- bowles simpson commission observed, the deficit is very dangerous because it leads you to do things that are not correct. we signed a tax deal in december
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in a bipartisan manner which was important. it gives incentives for investment, which gives a payroll tax cut to encourage workers and to encourage hiring, he gives incentives for education -- all of those all- important and everyone knew when they sign did with 80 + would increase the deficit in 2011, but we needed to get on the pro-growth path to confront long run fiscal issues. to come back and say, but look, the 2011 deficit is high, therefore we need to cut, is in some sense running -- completing what the problems are. -- conflating what the business problems are.
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the president outlined that he would release a budget that cuts discretionary spending down to a share of the economy that it has not been since dwight eisenhower was the president. and then he said, look, once we do that, that's all at one another and agree that is only 12% of the budget. that is not what the problem is. if we want to hold hands and together in a bipartisan way think about the aging of the population in the acceleration of healthcare costs, think about the tax rates on high- income people over the long run, let's do that and a bipartisan way. but let us not continue saying that the problem is runaway discretionary spending, because that is 12% of the budget, and we are running a deficit in 2010 and 2011 because of the business cycle. growth is going to be a key
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component in getting the deficit down. before the financial crisis, that deficits may be free% of gdp. it goes up to something like 11% of gdp. most of that 11% is from the business cycle. getting the business cycle reversed is critical to getting it down 4% or 5% and getting from that to primary surplus, it has to get -- come from cuts. but growth is fundamentally important. up until 1979, the united states cut the debt to gdp ratio by 85 percentage points. and it runs a surplus of only three or four times in that entire period.
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gdp grew at a sustained rate and made a big difference. we have got to live within our means. we have got to think about the entitlements, but that is an issue that we have known about for 30 years, and they cannot be done in a partisan way. if the argument was, why doesn't president obama come forward and say here is my partisan plan to go ahead and change entitlements, and we went through a period in the health care bill, in which it was not -- it was a cut to private subsidies, the medicare advantage program, it was not even medicare. that was transformed into the president wants to kill your grandma. [laughter] in an environment like that, we're not having an adult conversation about the aging population and the acceleration of healthcare costs.
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we cannot be in that environment. there are hardening things. in the fiscal commission, you had sitting senators from both parties say, look, let's hold hands and confront issues, as confront them in the future. it is not about right now. but you also had sitting members of the house saying absolutely not. we will not have anything to do with it. in some sense, we have to see how this one plays out, but the president is committed to a strong budget on the discretionary side, which if enacted would get discretionary spending levels down to somewhere they have not been for many decades. the art two ways to mortgage the future. one is by running up deficits spending and leading the bills to your kids the other is by not investing in the things that our
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kids will needs to get good paying salaries in the future, such as education, investing in r&d, investing in business, and physical capital. both of those are important and we have to preserve and live within our means and make the investments that we have to make. there are such things as bad cuts to make. cutting the things that are critical for our growth, that is not a good idea. if you will pull away the financial aid of nine millage -- 9 million college students in the middle of the school year so that thousands of them drop out, that is not a good idea. that does not pay for itself. that is a cut which cost you money. if you're talking about cutting things like that $30 billion of terminations and reductions, things that the president already said we can afford to do without, when you are cutting things that are duplicative, wasteful spending -- when you
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are not in phase one rescue mode, you can afford to get rid of a lot of things. what matters is not just some aggregate number. what should the aggregate spending of the government be? lastly, there are clearly concerns. we are in a recovery, shifting to phase two, but we have not yet recovered. we still have of fear on the horizon that we continue to monitor. most obvious, the price of oil. a lot of people have in their mind the 1970's were when the price of buyout -- oil goes up, it sends the economy into recession. there is good news on that front. number one, if you look at energy intensity per dollar of
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gdp, it is 40% lower than it was in the 1970's. most economists believe that the sensitivity of our growth rate to oil prices up or down is lower than it was at that time. number two, and you saw announced overnight and today that they are willing to use -- i was going to say, there is capacity among other oil producers in a way that at previous times when the price went up, they were not. nigeria and saudi arabia and some others are going to increase their production to replace the supply disruption coming from libya. the fact that there is capacity to address that is also the relative positive. but there is clearly a risk premium on top of stronger world
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fundamentals. as world demand for oil goes up, and world production rises, that drives the price and then there is a risk premium on top of that. the question is, how much comes from the fundamentals? there is one upside to the fundamentals, which is if massive oil demand is driving the price of oil up, those countries tend to buy a lot of stuff from the united states. if prices are going up because of supply disruption, that is not good for anybody. if it is because in china they are expanding output -- china has become a large export market for u.s. markets so that is not all in the negative. i would emphasize a long run energy policy so that we're not having this conversation every summer. we know that in the summer the demand -- that in the summer, demand goes up. we are having the same conversation again and again,
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year after year. whether energy efficiency, domestic production, or other energy policies to alternative fuels, it is important that we think those three. price of fuel is one risk. financial problems in europe remain a concern. a year ago, it felt we were getting momentum. the events in greece and some of these spooked financial markets, much like it does, so we continue to monitor the events in europe. third, the housing market remains in the dumps. there are maybe 5 million vacant homes, so i think it seems unlikely that with the reserve army of unemployed homes that it will become rebounding rapidly in the near future. that said, the impact of the housing sector on gdp growth, a
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major negative drag in 2008 and 2009, its impact on gdp growth in a negative way has lessened if only because construction is at such a low level that even if there remains depressed, that is not adding negative numbers -- it is just adding zero, not driving recovery as opposed to pulling it down. those three from our perspective are the areas that we continue to look at. on the job market, is clear that state and clear governmentslag the economy six to 12 months. there will continue to be a drag on the employment prospects. not enough to outweigh the private sector, but over the last year, the private sector has added 1.5 million jobs. the government side driven by
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state and local subtracted 300,000. those kind of numbers are negative, but approximately of that magnitude. i would close by saying, i think there is a source -- we have made a transition, a scary one. i think there is an obvious transition we want to make to growth based on more traditional investment, exports, consumption proportional to in time, keeping the saving rates at 5%. that is sustainable and broad base, unlike the ones that we have just gone through. the we put a focus on deficit reduction where it ought to be, in the medium to long term, and that we not mortgage the future while doing that by cutting exactly the wrong things, that we focus the cuts where they need to be.
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and that we obviously be mindful of those concerns coming. but the optimistic note of this -- warren buffett i got to know in the campaign was a supporter of the president. warren buffett says, in 1900 that dow was at 50. if you ask in 1900, what you think will happen if over the next 110 years we have two world wars, a great depression, a flu pandemic, a series of things -- list all the things that went wrong, all the challenges. they would say, the dow might be down to 20. [laughter] meanwhile, in 2011, we are hovering around 11,000. mine accounted friends, that is not accounting for inflation.
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it would be somewhere around 1000. our standard of living is up by a factor of eight or 10 since that time. productive innovative capacity of the american economy is virtually unbounded. also in the economic report to the president, there is a plot of per capita income in the united states from 1820. basically, it is a straight line upward. and there is a downturn, and even the depression, you can see. but it comes back to that line. the thing keeps going. you can see the downturn of 2008-2009 on that chart. but we are getting back on that line and we are growing. for all the hype about china, they could double their in come and we will still be five times more rigid in them. our workers of the most
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productive in the war. on a ppp adjusted basis, luxembourg is higher than the united states. [laughter] except for luxembourg, we have the most productive workers in the world. and anybody would trade places with us. everyone would like it. if you compute the ratio -- this is the best kind of statistic. on tractable, checkable. [laughter] if you compute the ratio of the number of people who want to come to your country/the number of people that want to move somewhere else, the u.s. has got the highest ratio by far. you can look that up in the almanac. [laughter] so i think overall, very positive prospects for the economy.
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we have to grow our way out of this spot that we are in now. do we have -- what is our time frame? we have time for a couple of questions. i would be happy to take them. >> could you use the microphone? >> this guy is a ringer. i know him. >> you signed off on my dissertation. if you need any help with that -- [laughter] i had a serious question. getting back to what you said about the breakdown between the link between gdp and the unemployment, it is supposed to be a measure of the output of the economy. but sometimes we proxy it by the input, which is not a perfect measure. and that is the issue with
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health care and education and a lot of our government spending. as a result of the stimulus and the subsidies to state and local government, that accounts for a larger share of gdp than it did a few years ago. is it possible that because of that, gdp is a less meaningful measure of our economic health than even two years ago? and that could explain the disconnect between gdp in unemployment? >> that is interesting. i have not looked at the data so i do not know the answer. i would try to figure out the magnitude of what the shift to explain it. i would not think the magnitudes of what share of the economy is education would change that dramatically over the two-year period, though it would break down okens loss significantly. i'll take a look to that.
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>> outside of this room, are we going to have an endorsement by the president of the president's own commission on productivity and growth, chaired by simpson and bowles? the state of the union in particular, absolutely quiet. >> i do not agree with that. absolutely not quiet. absolutely. [laughter] >> are we going to have a more vigorous enforcement of a really broad program of both revenue increase and cutting of entitlements? >> this is what i try to affect -- address in section c of my remarks. and what i said is that the president stated in the state of the union, he said, ok, on the
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budget i am going to put forward a budget that brings us down -- he did not say it in these words -- but something like primary surplus, which lowers discretionary spending since dwight eisenhower. that is a small share of the budget. he applauds the commission. and he says we're not going to do this and a partisan way. the only way will work is if we all hold hands and do it together. we will have to see if people want to do this together or go back to the pulling apart and granma mode. >> in the economic assumptions
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2012, you are forecasting real growth -- >> ok. >> forecasting real growth around 4%. you have stated that growth is very important to dealing with the deficit. as i imagine you are aware, the consensus forecast is somewhat lower for those years. in particular, the imf is more pessimistic than most seeing lasting effects on supply and demand and credit, as has been the case in several countries that have been through a financial crisis. can you explain why you expect u.s. to be different? >> the forecast embodies three parts. the short term, to thousand 11, a 2012. in the medium term, and one is the long term.
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the long-term growth rate, our forecast is almost exactly what theirs is. it has to be locked in in november so we are actually lower than the private forecasts for the next two years, and then we are higher for the three years following that. for anyone who says, rosy scenario, we are low and then high, they are high and then low. after the whole period, we're all on the trend rate. our fundamental disagreement is, the potential output being lower in the u.s. because we have gone through a deep recession or do you think potential output remains the same? our reading of the evidence, a lot of people will agree, that potential output is not destroyed. if you look at the graph of income from 1820 to the present, it is a straight line, the
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depression, he goes down and then they get back on the same line again. that is why we have a medium- term rebound. i have got to go. >> we have two questions. people like doug holtz-eakin had said some of the reforms are unworkable. a lot like for you to come in on that. the subsidies under health reform are unworkable. a like to comment more generally on implementation of reform. >> implementation of the health care act is not the main focus there, but i do not think the notion of pulling whisked into exchanges, subsidizing people -- pooling risk into exchanges,
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things like that have been worked internationally quite frequently. i think the fundamental problem of a purely private system where you allow premiums can mean is what we have gone to -- premium skimming is what we have gone too. a lot people get dropped as soon as they get sick. we do not combine risk, so we have major costs problems. in conception, it is not unworkable at all. we have to make sure the details are right. but i think it is a good idea overall. >> thank you for coming. i will end with the real easy one for you. a few days ago the president talked about the strategic petroleum reserve, considered some release. you mentioned that there will be supply coming from opec. will some of the criteria be
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about reaching the reserve, and the think about this? >> the strategic petroleum reserve exists to deal with large international supply disruptions. that is why we created it. that is mainly the criteria that we use for thinking about whether we should use it. the ca chair is not the person that decides to to use that. that is one of our tool kit of things. and we are monitoring the situation. it is nice -- it is completely full. it is in salt mines or something or in different places. but it is not depleted. that is an option that we have. and it is usually tied to the issue of the supply disruption. thanks, everybody. [applause] [captioning performed by national captioning institute]
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[captions copyright national cable satellite corp. 2011] >> the senate tomorrow will debate and vote on two proposals for this fiscal year. i house has passed republican plan that cuts more than $60 billion, and a democratic proposal to cut more than $6 billion. live coverage on c-span2 at noon eastern. in a few moments, the co- chairman of the president's commission on fiscal responsibility testify on capitol hill about their commission's final report. in about 2.5 hours, more about a bipartisan effort to deal with the deficit from democratic senator mark warner of virginia. after that, white house chief economist austan goolsbee says the best way to address the deficit is economic growth and not necessarily cutting spending. on a "washington journal," we
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will talk about continuing congressional efforts to pass the spending bill for the rest of the year. our guest will be texas republican representative and bernie sanders. we will look at president obama decision to resume military trials for detainees at guantanamo bay, cuba. we will be joined by associated press reporter matt apuzzo. >> president obama is fiscal year 2012 budget allows us to meet these threats and challenges by prioritizing our operational requirements. >> as cabinet secretaries meet with members of congress over their budget request for next year, watch the hearings on line at the c-span video library. search, watch, clip, and share -- is washington your way. >> the senate budget committee
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heard from the co-chairman of the president's commission on fiscal responsibility in reform. erskine bowles and alan simpson said members of congress are taking too much time focusing on cutting domestic discretionary spending and not enough time looking at entitlement programs and the tax code. the commission's final report did not receive enough votes to be officially issued and calls for $4 trillion in debt is a reduction over 10 years. this is 2.5 hours. >> i but to welcome everybody to the senate budget committee.
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we will focus on a fiscal plan and how it would address the long-term debt crisis. i want to begin by thankg them for an outstanding job they did. we would have never accomplished as much had it not been f their extraordinarily gifted and determined efforts. they made a significant personal sacrifice to lead this mission and we owe them deep gratitude. when history is written, their names will bring out as getting the country back on track. i also want to thank them for starting this project and pushing for a bipartisan solution to the debt that we
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confront. >> he succeeded in putting this issue in the national spotlight. there is now growing consensus on the need to act. they provided a biparsan road map for moving forward. i believe we need to seize this opportunity. i believe we need to act this year. that is why i have been part of a bipartisan group of senators who have turned the plane into legislation. if we can reach some kind of bipartisan agreement in the senate, we hope it will provide more momentum to move toward a broad agreement this year. here is what the chairman of the joint chiefs said about the threat. our national debt is our biggest national security threat. that is coming from the chairman of the joint chiefs of staff. make no mistake, we are at a critical juncture. we are borrowing about 40 cents of every dollar that we spend.
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spending is the highest it has ever been in 60 years. the revenue as a share of our national income is the lowest it has been in 60 years. no wonder we have record deficits. if we look at the gross debt as a share of the economy, we will see that it will reach 100% of the year, well above the 90% threshold that many economists hold as the danger zone. they studied the impact of debt on the economies. they looked over a 200 years span at 44 countries. this is their conclusion. we examine the experience of 44 countries spending up to data inflation, and growth. our main finding is that across both advanced countries and
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emerging markets, high debt to gdp levels above 90% gross debt to gdp, those levels are associated with lower growth outcomes. so if people wonder what this is barrel, this is a about our economic future. this is about opportunity. this is about jobs. this is about the economic strength of the nation. this is not just numbers on a page. this is not just about a bar chart showing deficits and debt. this is about the economic future of america. and the conclusion of the study is that when you get a gross debt above 90% of gdp, your future economic prospec are compromised. there are reduced. there are reduced substantially. that is why this matters.
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i believe the only way we are going to solve the nation goes a long term fiscal imbalances by a long-term debt reduction planned. the proposal would reduce the does -- debt over the next decade. it would get it stabilized and brought down as a share of gdp so we would be in a position to handle future shockshat none of us can anticipate. i believe the plan at the commission plan should include entitlement changes, tax reform that simplifies the tax code, lowers rates, and raises revenue. the commission plan provided such a budget approach. the savings come from non discretionary,andatory spending, and revenue. it is worth emphasizing that
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savings from social security reforms are used only -- and i emphasize "only," not for deficit reduction. if there is one message i'd like to get out there as clearly as i can, the savings in social security were redirected to social security, and to extend its solvency. this chart highlights the key elements of the tax reform including the plan. it scales back tax expenditures and lower tax rates. tax expenditures are now running over 1.1 trillion dollars a year. tax expenditures are as big as all of domest discretionary spending. it makes the tax code more progressive, it promotes economic growth, it improves the global competitiveness. one thing we have to have in
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mind is the competitive position of the united states. we are no longer so dominant that we do not have to worry about the effect of our tax code on the competitive position of the united states. notably, the commission goes the report included a blocked shot -- the commission included a report. instead of six tax brackets for individuals, the plan included three brackets of 12, 22, and 20%. capital gns and dividends would be taxed as ordinary income. the mortgage and terrible deductions would be reformed, better targeting their benefits. the income would be retained to help working families. the alternative minimum tax would be repealed. the commission goes to plan also increases revenue to 21% of gdp
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by 2022. over time it actually balances the budget. that is the kind of tax reform we will need to adopt. itlong with the spending reductions is what is required to actually succeed. let me just conclude by showing the different paths forward of the various plants. you can see that the course we are on. 233% of gdp on the current course, much higher than that if we look at gross debt. the right road map to access to a place i do not think we want to go because that is over 90% of public debtn a gross debt basis. the plan by the commission takes us to 30% of gdp.
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that would be about 60% of gdp. that is to meet a responsible target. to get down to 60% of gdp on the gross debt would allow us to handle any teacher shocks that we might experience as a nation. so that is why we went a little further than just a stabilizing the debt. we actually brought it down markedly as a share of the economy so we could handle future shock. with that, i am going to turn to my excellent colleague, a sessions for any thing he wants to state. >> the key for those wise remarks.
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>> we live in an ordered universe, thlaws of finance are as immutable as the laws of gravity. thing comes from nothing, government debt has the same kind of consequences that individual, family debt does. deficits do matter. they always have and always will. too much debt is always brought destruction, and it always will. some of our great mines have thought that they knew better. they say, well, we did not mean that much debt. now our financial masters say it is all congress's fault and it is a lot of congress's fault. but you have to clean it up,
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congress. we do. do not be too quick, be careful, do not go too far. do is just right. for sure, do not take any actions that might affect my programs, my interests. it is the other programs that are wasteful, not mine. your commission rose above that. pour the most part, it was not without a compromise. your recommendations, i think, should have gone even further. but it was a bipartisan effort, and it left no doubt that our debt problem is not imaginary but very real, even the media. former chairman alan greenspan told the "washington journal" our nation has a little better than a 50/50 chance. surely we can take the hint that something serious must be done.
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they are warning us that they could downgrade our debt in less than two years if we do not take action. so the nation and much of the world is in a serious financial fit. if you read the comments of wall street, the fear there is real anchor his real among the wall street people. their words combined concern for our nation's future and short- term self-interest. some of our best people are producing conadictory ideas for action. you help us cut to that confusion in my view. so the house proposes meaningful debt reduction, meanwhile the president advances his investment agenda.
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his budget cls for us to live within our means and pay down our debt. what world are they living in? are we now through the looking glass a post-modern world where words have lost all meaning? if so, our beloved nation are in greater danger than many think. i do not think so. american people get it. we can do this. this is not impossible. leadership at this time is most precious and in short supply. it seems to me when confusion, uncertainty, short times, even fear abound that good leership like your report should call us to return to the tried and true, first principles. we are a vigorous, healthy people. we can accept the truth and get on with fixing problems. the people know that the blast folks in washington at the right road will be difficult but it
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will lead to prosperity and progress and preserve our heritage of freedom and limited government. the current road leads to debt and the decline. we have to start telling the truth. the truth is that this budget we have been presented does not live within our means but doubles the entire gross debt of the united states from $ 13 trillion. it assumes no recession, low interest rates, and no new war or military conflict. it cannot stand -- it will not stand. for the time and effort you have given this cause, we are much obliged. you have worked hard giving a clear picture of the danger we face, and the message available to orcome that danger. this nation is grateful for your service. thank you. >> thank you so much, senator
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sessions. we will turn to our witsses, two people of real courage and character. i would say to other members, the senator served on the commission, as did i. the leadership of these two was really textbook. it could not have been done better. at the end of the day, 11 of the 18 members endorsed the findings, five democrats, five republicans, and one independent. that is as bipartisan as it can be. welcome to the budget committee. thank you for your leadership. i do not know who wants to go first. >> thank you very much. thank you senator conrad and sessions. the key for your remarks and
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explaining to ose wonderful charts that we have been tching for many months. they have been very helpful, and you are very informative. it is a great honor and privilege to be here and to be in this chamber in these offices, and not be always inspired by the democratic experience. if that feeling ever leaves you, you want to leave. it is a great for. we have left our witness prottion program, we make sporadic appearances in various locations as is today. the people are waiting for us to go back and to sequester when we leave. let me just say this. it is a treat to look around this room and see friends of both parties that i thoroughly enjoyed what i was here. and over there is mike. he replaced me and people said
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"thank god that he did that." it was a selfless effort. he is an old and dear friend, he and diana are very dear friends. this guy over he was a staffer when i was on the select commission on immigration and refugee policy. now look at him. ron portman, i worked with all of them. but on with the business. i know it is five minutes or something like that. this forum is were the most frustrating and irritating, cumber some work of legislature is performed. as an old cowboy would say, "it
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ain't pretty." if you hire on to be a cowboy and you get a bucking bronco, you cannot complain. we drew that critter. he is a sendid man. is a remarkable man, a creative and positiv fellow of great integrity. an absolute joy to work with. we have thoroughly enjoyed our time together and work is what we do. we do work together. folks say to us, "what are you doing this?" i say we have 14 reasons. he has eight grandchildren and i have six. it cannot be simplified anymore than that. that is what this is. it is about my grandchildren and yours, iis not about us. it all started for me when i got a cheerful call from joe biden in january. he said "i have a real deal for you." i said let me get in on the
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phone so she can laugh along with me and we can get out of this. he said he and i work together on so many things, and we are here together. and i said, "who is the co- chair?" the first call i get is from elizabeth dole and bob. you need to serve in both of those capacities. it is very helpful. if you're in the minority for a while and you are in the majority for a while. it sobers you out. anywaythe goals called and said this is one of the finest men i have worked with. it took us three months in this commission to establish trust. it just plain trust. trusties to be the coin of the realm around here. let me tell you, the coin of trust is severely tarnished in this place. s that. i work with so many on the other side of the aisle -- kennedy --
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we trusted each other. i hope that that can come back. it came back and our commission. once we got through the initial hammering which was "who is the biggest spending president in the history of the world?" "george bush. then the other side your guy has o one.e him twp tp then a remarkable group can audit, and of course the chairman. 60% of the commission dice. that is pretty good. 60% is kind of a big number
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around this place. it fits well with the filibuster activities. when we go around the country, we just tell people -- this is a numbers guy. if you have any percentages you want to grow, this isour man. and he does numbers. it works. we still do things together if we can. i have one more minute. i yield to myself whenever we get there. i tell people is very simple. people in america are very ahead of all of you. they know what is going on. when you say, why do you not go back and think what ople are dog at their kitchen table? they know that if you spend more than you earn, you lose your but. they know if you spend a buck and bar 40 cents of it you must be stupid.
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they have figured out this government is stupid. forget the gdp and all the rest of it. >> his son called him and called"thanks, pop,." that is what this is all about. we thought this is what iis all about. without these guys had the guts to attack -- that is a. it is a phony. it is wrong. it is untrue. we are doing it so it has it own solvency, in your chart showed
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it. so i just want to give you a couple of quotes. and let me just say about social security, i have a lot of the e- mails. social security is not a retirement. it was never intended as a retirement. it was an income supplement after the depression. the average age of life was 63 and that is why they said the retirement age was 65, at the beginning ofhe largest ponzi of all time. then there were 10 came in. today there are three pankin and one taking out. in 10 years there will be to pain in and one sticking out. how long do you think that kind of thing can sustain? the money has not been stolen by you greedy people. it is all choice stuff.
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but of thrills and stuff on the side paper. it is paper. they were not going to leave that kind of cash, nor did roosevelt want it. that is why the city can get in there and give full faith and credit to get it out. if you have to go through the language, remember at everything in this place, it is my experience that you have to use fax. -- facts. two "and then i will turn it to the numbers guy. it says 55b.c. -- the budget should be balanced, arrogance of officialdom should be tempered and controlled and assistance to foreign lands should be curtailed less rhombic, bankrupt. "
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" at what point is danger of supposed to be expected, it must bring up among us. if destruction is our lot, we must be its author and fisher. as a nation of free men, we must live through all time or die by suicide. and finally, i do noknow where this baby ce up, i do not want any copyright infringement on itinfringement"gold is the money of king's, barter is the money of peasants, and debt is the money of slaves." go look at alexander hamilton and his statue. everything this country met had to do with getting rid of its debt. here is your hands full. god bless you. >> thank yosenator simpson.
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>> thank you, sir. i spent a long time trying to get here. i sometimes think got four unanswered prayers. i want to thank senator conrad. he is not here but senator gregg. without their leadership, none of us would be here today to talk about this. hawaii thank you for having the courage, you and the group tt stood up some years ago and said we are not going forward unless we have a commission to deal with this. it would not have happened without you. the key for meeting this morning, and thank you for your kind words. i also want to thank senator durbin for having the courage to support what is a politically very difficult plan to support.
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i want to thank senators warner for your work in trying it to turn what is a 67-page plan in plain english to a lislative language and bring together a bipartisan group to make this happen. i am not going to use any notes today. i am just going to talk to you. i am really concerned. i think we face the most predictable, economic crisis in history. a lot of the sitting in this room did not see this last crisis as it came upon us. this one is really easy to see. the fiscal plan we are on today is simply not sustainable. this debt ended these deficits that we are incurring on an annual basis are like a cancer.
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they are truly going to destroy this country from within unless we have the common sense to do something about it. i was with former senator kerry about a year ago exactly. he said "look at the nation goes to crent income statement and let me tell to what you will see. you will see that 100% of the revenues that this nation produces today are being consumed by are mandatory spending and the interest on the debt to." that means that every single dollar that was spent on these two and wars, on our military, on national security, on homeland security, on education, on added research, is borrowed and half of that is
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borrowed from foreign countries. that is a formula for failure. if we do nothing, if we just take the ostrich theory in this room, we will be spending a trillion dollars a year in interest costs alone by the year 2020. think about that. that is $one trillion that will not educate our children. it is $1 trillion that will not bring broadband infrastructure to rule south carolina. that is $one trillion that will not create the next new thing in this country. it will create something over there from the people we are borrowing money from. it is crazy. this is not a problem we can grow our way out of. you could have double-digit growth for the next two decades and not solve this problem. so do not think we can grow our
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way out of it. this is not a problem we can tax our way out of. raising taxes does not do a darned thing to slow the rate of growth of health care or to change the demographics of the country. if you want to try to solve this with just taxes, you will have to raise the highest marginal rate to around 70%, the corporate rate to 80%, the capital gains to 50%, and what kind of country we have? you are not going to have businesses started or growing with that kind of stacks -- a tax structure. we cannot simply tax our way out. we cannot cut our way out of this problem. when i see people go on the sunday shows and they say, oh, we are going to cut our way out of this problem, but we are not going to touch medicare, medicaid, and we are not going
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to deal with social security, and we here are not going to take $1 out of defense. we have to pay thenterest on the debt. he know, if we exclude all of those things, you have to cut everything else by 65% to 70%. that is not going to happen. that is not a realistic world. what al and i tried to do was to present a realistic plan. a plan that turned out to be a bipartisan plan. it is based on six basic prinples. the first is, we did not want to do anything that would disrupt a very fragile economic recovery. the economy is in a recovery. israel today. but, boy, we can lose it quickly.
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when we look at cutting spending, most of our spending cuts, in 2013. that is where we get back to 2008 levels, to a pre crisis level. i believe we can do that. i expected that the republicans will be getting back to 2008 levels in 2012. we simply were afraid to do that because we did not want to disrupt what is a very fragile economic recovery. we have real cuts in 2012, but we get to 2008 levels in real terms in 2013. we did not want to do anything that would harm the truly disadvantaged. that is why if you look at the cuts we made in mandaty spending, we did not touch things like food stamps, unemployment, ssi -- we left
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that off the table. when you look at medicare, we did a couple of things that me our job more difficult. we increased the minimum payment up to 125% of poverty to protect the truly disadvantaged. we give that 1% bond of a year to what is people between 81 and 86. both of those costs money. we wanted to do the right thing. when we raise the retiremt age, we did put in a hardship provision to protect people who have those back breaking jobs, as many will label jobs that cannot work as long as we raised. we tried to protect the truly disaantaged. third, we do want to keep this country safe and secure. i am not personally one who
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believes we can afford to be the world's policemen. i will put in more basic terms. i do not think this country can afford national defense than the next 14 he had largest countries combined and have enough money to invest in education, infrastructure, and research which we have to do in order to be competitive in a knowledge base to global economy that we all compete in today. fourthly, i do think we have to make these investments in education, infrastructure, in high-value research. it does not mean we have to spend money willy nilly. it is a university system. i saw where some of your research dollars go. today we have 375,000 research
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projects that you are all funding. his is on 3000 separate university campuses. all of that is not great research. some of it keeps us from going down a lane and it ends up dying. it is good research because it keeps you from making a bad decision. some of it ends up in something that is great. some of it is not high-volume research. in a time of limited resources, we have to spend our money mor wisely. fifth, for god's sake, let us reform the tax code. the tax code is archaic. it was created when america dominated the world. we live in a global economy today. you saw it today. it is a fact. what we proposed was broadening the base, simplifying the code,
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eliminating were greatly reducing these tax expenditures, bringing down rates, and using some money to reduce the deficit. we went to what is called a zero based plans. if you elimina all of these 1.1 trillion dollars worth of tax expenditures, i contact your marks, -- i call them tax year marks, we have $1.1 illion that we are spending in the tax code. but if you eliminate those, you could actually take rates to 8% up to $70,000, 14% up to $210,000, and a maximum rate of you could take to 26% and go to a territorial system that would bring trillions of dollars or
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billions of dollars back to the country that is captured overseas and bring jobs over here. so i hope we will reform the tax code. lastly, we have to cut spending. we have to cut spending whenever we find it. we cannot just deal with discretionary spending. the democrats, as near as i can tell from reading the paper, are talking about cuts of $10.5 million in discretionary spending and republicans are talking about $61 billion worth of cuts. let me tell you something. $61 billion out of a 3.7 trillion dollar budget is 1.6%. i can cut my budget 1.6% tonight, tomorrow mning. if i took $625 million out of a $3 billion budget at the university of north carolina. 1.6% is nothing. the problem is that you are all
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focusing on taking 1.6% out of a very narrow part of the budget, 12% of the budget, so some of the cuts a having a dust proportionate adverse affects on certain groups of people. but if you are talking about the gross amount of $61 billion, it is nothing. we take 1.7 trillion dollars out of discretionary spending. we take $430 billion out of health care spending. we take $215 billion out of other mandatory spending, and we get social security solvent for 75 years. our plan reduces t deficit by 4 trillion dollars, it takes the debt to gdp ratio to 65% by 2020, and to 60% by 2023, it cuts the deficit in half by 2015 to 2.3% of gdp.
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it takes it to 1.2% of gdp by 2020. i came here today to simply ask you to act. i know these cuts are politically difficult. but this is not a decision that we can propose -- postponed. we have got to act, and we have to act now. if we do, the future of this country has never been brighter. we can compete with anybody. we have to get our fiscal house in order. thank you mr. chairman for allowing me to come. >> i think you have made the case about as clearly and persuasively as it can be made. i went to thank you you both for the leadership that you have provided. let me ask you this.
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what happens if this does not get done? in other words, i did not give all the bonafide when i introduce them, but this is a man who was chief of staff for the united states, he has been the administrator for the college system at the university system in the state of north carolina. a pretty good set of bona fides. and every place that he has served he has produced results. let me ask it again. what happens in your judgment to the united states if we fail to get an agreement in the range of what the commission concluded was necessary? >> here is what he said reminds me of when my uncle sam died in
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north carolina. the obituary editor called up to ask about him. i can't kind of went on and on about all of the this he had done. finally he said, you know we charge $5 award for everywhere we put in the paper. she said, no, i did not know that. in that case, just put in their "sam died." look in the casket and e if that is really your old man. you know, i used to say that i got into this thing for my grandchildren. i have eight grandchildren under 5 years old, i will have one more in a week. my life is wonderful and it is wild. but this problem is going to ppen long before my grandchildren grow up.
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this problem is going to happen like the former chairman of the fed said. it is a problem we will have to face up to in two years, maybe less or more. but our bankers over there in asia began to believe that we are not going to be solid on our debt, that we are not going to be able to meet our obligations, and to stop and think for a second what happens if they just stopped buying our debt? what happens to interest rates? what happens to the u.s. economy? in the markets will absolutely devastate us if we do not step up to this problem. the problem is real, the solutions are painful, and we have to act.
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>> alan, do you want to add to that? >> i would just a -- i know it is repetitive, if you can understand hear what the people of america as we travel around and we do stuff. we go to the business council we go to the conservative group in dallas, the economic club of new york, and wherever we go, people get it. then we tell them that if they just go tohe internet and to go www.fiscalcommision.gov, it is 67 pages. if we leave that out they will never read it. it was not written for patents or politicians or panderers, it was written for the american people. it uses terms like "groing broke" and "shared sacrifice."
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there has never been any sacrifice required of the american people since world war ii except for our military, and god bless them, and they chose to do it. they are volunteers. so when somebody says, you cannot use that word. well, the american people are using that word, it is called " shared sacrifice." it is a puzzling thing. it is the right and the left, they are not involved in social issues deeply. now this has risen to no. 1. jobs -- very important. this number one or number two is the debt. the i understand debt. in their own home they have been wiped out by debt. the first thing that anybody did in this crash was to gather
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their loved ones around ansaid we have to get out of debt. that is first. you know my wife and and said " pay it off, al." so i said "it is a deal." i think it will become before two years. i think that when the people that hold of this paper look arnd and all you have done is cut waste, cut, abuse, and all this and congress pay, they know if you did not get anywhere. you got the 5% or 6% of the hole and they will say you did not do it. when the debt limit extension comes up, you have 85 guys over there saying, hey, i will never vote for that under any circumstances. then you will hear the cracking of kckles and elbows as they say, if you do not do this, you
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will impair the fear credit of the u.s. and might even have to shut down the government. so will say, that is why i came here. there will be sound of bone against flesh. that point, i cannot imagine of shutting the government. our party tried that once and it was about the biggest disaster that i had ever seen. so i am just saying that at some point, i think within a year, if they just thought we were playing with fluff, 5% 7% of this whole, they will say i want some money for my paper. if there is anything money guys love, it is money. and the money guys when they start losing money panic. let me tell you that they will and it will matter what the government does. theyill say, "i want my money." do they have a better place for it? who knows.
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>> you know, i do not see how we could not face up to it. he showed a chart, senator .onrad he says it is our greatest national security prlem. think about that. if you do not want those people crating the next big thing over there but over here, there will not be any money for it. if you are a business guy like me, small businesses cannot grow and cannot create jobs without money. you know, they will be starved for capital if this budget continues to grow as it is today. >> thank you. my time is expired. we will go to 5 minute rounds. we will make an exception for senator sessions. five minute rounds because of the number of people we have.
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senator sessions. >> the remarks you have just made are very sobering. it goes beyond the academic or theoretical to a warning of an immediate and dangerous threat is before us. the language you use in your written statement, i noticed it was pretty stark. "we believe if we do not take the site -- divisive action, we face the most predictable crisis and history." i cannot dispute that. the more i read about it, the more i believe that is true. i believe we need to take action. let me ask you to just share with us your thoughts about the president goes the budget if you had a chance and if you think it
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is decisively enough to alter the protection we are on. >> the president's budget, i think, the domestic, discretionary spending does a pretty good job if you look at it over eight years. it has some gaps in it like they talk about investing in transportation, but they do not tell you how we are going to pay for it. we say you have to cut transportation spending back to the level of income coming in, or you have to spend at the level you are at today, and we
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propose a $0.15 a gas tax to pay for it. your choice. the total deficit reduction in the president's plan is somewhere between $1,000,000,000.2000000476 dollars. we proposed four billion dollars. -- 1 billion and $2 billion. we proposed $4 billion. if you look health care, we proposed $410 billion in cuts. he proposed $350 billion, but only part oit is specific. we said how we would pay for all of our cuts. on other mandatory spending, we
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had abo two hundred $15 billion in cuts for 11.2% of that time period, and he has about $60 billion for waste, fraud and abuse. we could not find anybody who could support more than $20 billion for any of that. i do not know where the other amount is going to come from. on social secury, we have a real plan that leads to 75 years of solvency. they talk about us doing something for solvency and also making sure that we up the minimum payment and protect the basic payment and assaulted in the long run, and of course, our plan does -- solved it in the long run, and of course, our plan does its -- does exactly that. on revenue, they eliminate some
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tax expenditures, but they spend the money that they create by eliminating those tax expenditures. we take those tax expenditures and the vast majority of the wheat used to reduce rates and to lower the deficit -- we used to reduce rates and to lower the deficit. the president's plan i think falls short of what the country needs to do right now. ihink the president has done a lot of good things. i think appointing this commission was a bold step. i thinkn the state of the union he showed the way of some of the things he would cut. in the budget he went a little bit further. i hope he will show strong support to what senator chamblisand warner are trying to do. but it is going to take efforts
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from both hous and both parties. >> well, the way we calculated it is not the four trillion dollars you proposed. i think it is insignificant. with regard to discretionary, i just want to push back a little bit. we calculated this out. reducing the base line by $61 billn over 10 years, assuming some steady growth or no growth, however you calculate, but taking that baseline down $60 billion would result in saving $850 billion, pushing $one
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trillion. you propose that 1.7 trillion dollars. the $61 billion would amount to, as you noted, 1.6% of the overall budget, and if you take it only on discretionary, it is about 6%, so i do not think that is harsh or extreme, especially in light of the fact that the administration has achieved a 23% increase in discretionary spending baseline in the last two years. i believe you're on the right track. i believe you are sharing with us the fundamental truths of the financial condition we are in. i do believe that the american people would benefit from social security and medicare and they want to see us bring washington spending on control -- under
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control too. it should not be off the table. it could result in trillions of dollars in savings if we let data. combine that with entitlement reforms, and we could do pretty well altering the trajectory. >> thank you. you correctly say that you cannot do serious deficit reduction just by cutting, and you cannot do serious deficit- reduction just by taxing. what i want to do is make sure that as part of this debate we see that to really drive the deficit down we have to do some serious and growing. to me, that iwhat the tax reform debate is all about. in the two years after the 1986 tax reform bill was passed, we created 6.3 million non-farm
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jobs. twice as many as were created between 2001 and 2008, so we are clear. you all have done an excellent job. isn't the heart of your interest in tax reform that it will help us create more good paying jobs and is key to growth? >> unequivocally, yes. as you know, our plan has been called reagan on steroid it was modeled after the wyatt gregg bill. i believe that if we take such steps and we get rid of some of the inefficiencies in the tax code and bring down rates and reduce the corporate rate and get rid of this territorial system, i think we have a chance to really create a lot of jobs in this countr >> l me ask the two of you as
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a technical question. i am very appreciative of all the work you have done. if you proposed an important budget enforcement mechanism, you did not include a mechanism that would keep us from backsliding on tax reform. what concerns me is that when you go back and look at the history of 1986, practically as soon as the ink was dry, as soon as democrats and ronald reagan came to this historic kind of compromise, what you saw was the lobbyist went back to work and they kept asking in a break after a break after a break, and pretty soon it added up to 15 belsen new brakes added to the tax code between 9 -- 15,000 new brakes added to the tax code between 1986 and 2005.
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do the two of you agree that this time, regarding tax reform, it is going to be important to have a mechanism in place to know launder have this easy backsliding so that a few years at -- no longer have this easy backsliding so that a few years after we put in place major tax reform we do not end up in the same boat? >> i agree wityou totally, senator. it has been so interesting to talk to people about the tax code. we have people -- one person came and testified that one all reagan was his hero -- that ronald reagan was his hero. i said, that is dead. he was my hero too. -- that is good. he was my hero too. i said, ronald reagan raised taxes 11 times in his eight years. he said, i did n like that at
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all. i said, it is not whether you liked it or not, why do you think he d it? he did it to make the country run. we have to put traders in there. we have to do things. -- put triggers in there. we have to do things. i cannot understand how distorted things can get that we would put a pack tax on top of the present tax code. if you did dam it, you have to scrub everything off the board that, if you havepe to scrub everything off the board. at some point, we felt that only 2% of the american people, the
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wealthiest in the america, the connected, are using these 180 tax expenditures. that is to is using them. the little guy does not even know what they are. he does the standard deduction. i will not mention this. the bonds will fall. oil depletion allowance, mine land reclamation, it comes from wyoming. if it came from the country, we would be the larst coal producing industry in the world. unless you do something, these things are like the zombies that rise from the grave. this city is lined with people who make big bucks to go get it back. this time, they cannot bring home the bacon. the pig is dead. >> thank you. a mechanism to make sure we have
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tax enforcement from backsliding to make sure -- like we're going to do with the budget. >> absolutely. the top earners in the country pay a marginal rate of 16%. warren buffett talks about how he pays a lower rate than his secretary does. thats what will happen. will benefit people who are by and large in the upper-income bracket. >> senator simpson told man need to put my money where my mouth is and get into politics. i ran as american -- i ran for mayor as a result of that. he has been a tremendous mentor to me over the years. i appreciate that both he and mr. ball's were willing to take on this task, -- both he and mr. bowles wereilling to take on
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this task. i was one of the co-sponsors of the conrad-greg bill. but bu the was essential. i was disappointed when it did not pass an elated when the president decided to do it anyway. i thought that was a good step. i was disappointed when the president missed the opportunity in the state of the union to say exactly what you of been saying here today, to inform the people of this country of just how desperate the situation is so that we can take some positive action. i was disappointewhen the budget proposal came out because i think that was another opportunity for him to put some of those things into effect. the biggest thing he did in there was take the tax expenditures and use them for new programs instead of reducing corporate debt. the american people have figured it out, with your help, and they are getting clearer and clearer every day. we have got to get congress to catch up.
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there is a question in there somewhere. [laughter] both of your recommendation -- you broke your recommendations into six areas. i know they your task was to have a single vote on all of that, but given the fact that congress has trouble doing comprehensive legislation, would it make sense for us to break this into six areas separately, or do you think we should do it in one big piece of legislation? >> allen can probably speak to that better than i can. what i can tell you is based on our experience. i want to address one of the things you said, that we had shown how desperate the situation is. it is only desperate if we do not act. if we do act, the future of this country is so bright i nnot believe it. if we just have the guts and courage to stand up and do something that israel today, on
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all six of those areas -- that is real today, on all six of those areas, our future could not be brighter. we started out saying that one of the easiest things to do, since it was part of the president's request, was social security, because you can kind of figure out how to get it to 75-year solvency and make it safe for the next 75 years. we thought that was morally important. second, we thought we could do some of the discretionary stuff, and thought we could make some progress there. as we went on through this process, we und that the bipartisan group really did coalesce around doing something that was comprehensive, and we got more support rather than less support when we were bolder and did something more comprehensive, rather than
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trying to break up into individual pieces. i think we also felt that, you know, it is tough to keep anything together year. i remember that so well. but if we could just stabilize the situation, just stabilize things, so that they know it is not just on automatic pilot, that alone would be worth everything. you would not challenge that, would you? of course you would not. you would try, but you would not. let me just say this. if you cannot get social security solvent for 75 years, and this congress cannot do that, you can forget everything. you will neveret to medicare, medicaid and dense. you will have failed what we see is the easiest thing to do, which is to restore solvency of social security for 75 years. it is very clear what we do.
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we do not privatize it. we do not steal from old people. we are not throwing bedpans out of hospitals. that is not what we do that. people who use that are involved in massive fakery ad ws. i do not use those boards. -- those words. i have many other words. [laughter] i want to answer the questions about social security, but if you cannot solve that, you are gone. forget the rest of it. it will not work. it just will not work. he will not touch it with the stick. >> i appreciate your comments about having transition rules in the tax reform. i think that will make it possible to get it done. i am anxiouso work on all of the ideas you put forward. >> if we only do social security, we have not come
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close to solving the problem. if we only do domestic, discretionary spending -- you could get rid of all discretionary spending and you would still have a $one trillion deficit. you have to look at all of it in order to really solve the problem you are facing. >> i still think we will have to do it one at a time with the agreement to do all of them so that we can get the trust of the american people. they do not think we are going to do anything. my time has expired. >> your skills and bipartisan work -- i saw how you work with ted kennedy. you did about 40-50 pieces of legislation. nobody realized that. you always work with the other side. your guests will be heavily called upon. >> thank you. -- your guesses -- your gifts will be heavily calderón. thank you.
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>> after we lost the vote on our proposal, we had 53, but we needed 60, i was called to the vice-president's residents to negotiate the executive order commission. senator nelson volunteered to go with me and i readily accepted. i just want to say, we would not have gotten the executive order commission without bill nelson hanging in there and being tough. also, i will forever be grateful for his assistance in negotiating the executive order commission because that was a pretty tough negotiation as well. senator nelson. >> thank you. senator ensign, the problem that if we try tdo these things one at a time, we ll
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not get it done. you have to take a comprehensive approach, and i do not know how bad it has got to get before we can get everybody to the point upbeing all willing to paulull and hitch up their belts to do a comprehensive approach. you mentioned the six major components. well, you know, one of them was health care cost containment. well, you know, why should medicare be paying the premium price for drugs instead of the discounts that the u.s. government gets in at the drugs for medicaid? well, we know why. why is their royalty payments that is not being paid for the extraction of oil from the gulf
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of mexico? that is a taxxpenditure. well, we know why. so, if you try to take individually items on, you are not going to be able to get -- you are going to get duped, because the powerful interests are there that can always beat you on an individual basis. so, now i want to ask a question. you all have put social security as part of this overall reform, and i agree that it has to be, but you also are quick to point out then nothing in the way of social security savings here goes to help the deficit. so, other then the symbolic
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value of tackling social security for the long term, ich is a notable goal and which, by the way, is one of the finest achievements in the u.s. government back in 1983 when social security was down to about six months of solvency, before going into cardiac arrest. everybody came together in a bipartisan way, and reagan antonio got it done. got it done.l but why the social security have to be so much a part of it since it is not actually helping the deficit, which is what we are trying to get to ride year, other than the symbolic value? >> -- get to right here, other than the symbolic value? >> first of all, we had no
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choice. if you look of the president's mandate, the second part required us to look at long-term entitlement and the effects they have on the country. in addition, we really felt like we had a moral obligation to face up to social security. we are not making this up. the trust fund is exhausted. all of the interest earned on the trust fund was lent to the general fund. it is exhausted and 2037, probably before that now because of what we did at the end of last year, and benefits will have to be cut by 22%. that is under current law. that is not something we made up. it happens. in addition, it is a fact backing -- i will just leave it at that.
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we made promis as a country that we cannot meet. what we tried to do was restore the solvency of social security for 75 years while protecting the most disadvantaged and in fact giving them higher benefits so that they can have some kind of quality of life. i think too, that we seen -- at least i saw in my 18 years here, sometimes, for budget purposes or gimmick figures, they will use the $2.5 trillion of social security as not counting it against the budget. then sometimes they wil counted. when you have a figure, dollars sign2.5 trillion in -- a figure surplus,utrillion in
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it -- i think you still leaole am the only guy living you ever had a hearing on the first aarp. they're still looking for me. you cannot play games with it unless you want to go up to all of these people on the other side saying, you rotten things are going to touch my social security. waddle up to the window in 2037 and get 20% less. there is no way to aid that. it only pays payable benefits. it will not pay schedule benefits. if everybody will wake up and figure that the thing they get from social security when they're 65 will not be there because you did noing.
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>> thank you both for what you have done. if we are wise, we will take what you have done, add a little of our own wisdom, if we have any, and get something done. otherwise, we will be out of a job. can you igine any scenario where we can save social curity from in pending massive cuts, 30% or more, or any entitlement program without been adjusting the age for eligibility taxes -- without adjusting the age for
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eligibity? >> youan do it without adjusting the age, mathematically, so yes. but we thought you should adjust the age. you are not eligible for social security at 65 today. you are eligible at 66. under current law, it goes to 67 at 2037. >> can you imagine any scenario of saving social security or medicare, or getting our debt under control without adjusting the age of eligibility? >> it is impossible. they used to be the 63 was life expectancy and 65 was retirement. now, if you retire and 65, you may live 20 more years.
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how is the supposed be -- that is supposed to be when there were 16 people paying yen and now there are only to people paying index i know is tell people to read the trustees' report on social security. -- 16 people paying in and now there are only two people paying in? i always tell people to read the trusties report on social serity. >> but the view talk about sacrifice. we like to pat ourselves on the back and talk about how great we all are. i bet nobody in this room is doing anything near like going to afghanistan. let's put this in perspective. all we're asking people to do is to do tngs that make sense. the sooner we do it, the better off we all are, because if we do it sooner, the solutions are not
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as draconian. so, let's talk about means testing and sacrifice. if you took the idea that if you make $50,000 or less, your social security benefitsill not be adjusted, what does that mean for people who make over $50,000? >> you would probably he to slow the rate of growth. >> when i was 21, my mom died. at 22, my dad died. my sister was 13. social security benefits came to my sister. it made the world of difference. i am 55. i do not have any kids. i make $175,000 per year. i am going to have a military retirement. what would it mean for someone at my income level, a diffence between what is being promised and what would be paid? would it be $100 a month, two
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hundred dollars a month? >> i cannot tell you exactly. >> could you get me that number, because i believe it is going to be very small. >> one thing i can tell you is that your benefit actually would not be cut. the rate of growth in europe benefit -- >> means testing is not cutting anything, it is paying what you can actually afford. >> it grows up the rate of inflation rather than a higher rate. >> senator simpson, do you think that is a smart idea? >> i am 79. i have seen these people in the room with their signs and all sorts of activity. i say, wait a minute, pal. i put five bucks then when i was 15 and worked at the bakery. i could in when i was in the army. you did put in then, not now. i never put in over $874 per
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year, and neither did any guy in the united states. this is fakery. then i got stuck for 1200, 1400, two thousand dollars. you are going to get it all back. when i left in 1983, we found out a guy got everything back plus 6% interest in 3.5 years. >> will both of you it urged congress to take up social security reform? >> absolutely, unequivocally. >> thank you. let me thankoth of you for your work. i think you have the right formula. each element will be controversial. we understanthat. let me deal, with the limited time we have, with the revenues.
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and now you have already had some discussion in regards to consumption taxes, but i want to make a point here. we get around to tax reform, if we are lucky, about every 25 years, so it is important that we get this right. in your report, the goal is to have revenue equal to 1% of our economy. that is the revenue goal that could be achieved through the reforms in income tax that you have outlined, or it could be by using some consumption taxes as well as our income tax, but the revenues would be the same. i mention that, because since we pass the last major tax reform in 1986, our chairman frequently point out that there are now 140 provisions that have been added temporarily and need to be reviewed for extension on a regular basis. my concern is that if we were to
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pass the recommendations of the commission, it is unlikely that would stand for very long before congress would once again, for reasons of political expediency, use the tax code rather than the revenue code in order to carry out policy. i think we are safer if we use less income tax revenues and have more consumption revenues to equal the dlars that we want to bring in. i also point ou the realities of competitiveness. the fact that, during the best of times, this nation did not save enough, and our policies do not reward in savings. our tax code certainlyas not been terribly helpful in rewarding savings. lastly, we know that corporate income taxes are not adjusted
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whereas consumpon taxes are adjusted in international trade, which puts american manufacturers and producers at an economic disadvantage. the argument i year the most is that we cannot make -- i ar the most is that we cannot make consumption tax is progressive. but we can. my goal is to bring in revenue in a moral productive way it than we currently do. having said all that, and knowing that you did your best to put forward policy suggestions that we all need, and knowing that your proposals would be politically controversial wherever you went, could you just share with me why we should not be considering, as a matter of policy, less reliance on income and more on consumption, knowing full well the history of congress in
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changing the tax code? >> let me tell you why it is not in our plan. for example, about a week before we started, the u.s. senate voted 85-14, and it did not look like the odds were too great we would have a consumption tax. >> let me stop you on that. a lot of us were tempted to put in similar resolutions on social security, a similar resolutions on every one of your proposals, and i dare say we could've gotten 85 votes on each one of those individual recommendations. i think it is terribly irresponsible. >> i am just telling you why we did not do it. there was no opposition on the commission, as near as i could tell, to vat tax or consumption tax in theory. most people believe that it is
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much better for tax consumption if you can do it on a progressive basis than it is to tax wages, investment or savings. you have to make it progressive, but there was not a l of opposition, in theory, on either side of the aisle. where there was enormous concern was that we would end up with two engines of revenue. we would end up with income tax that would be escalated and consumption tax and there would be two engines feeling revenue and feeling the tax rate. that is why -- fuelling revenue and fuelling the tax rate. that is why there was not support for it. >> i feel better getting that explanation. i would just conclude on this point. we want the best policy objectives. future congresses are going to act regardless of what we do in this congress with these recommendations. i just think we are safer having
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a tax code that is less likely to be changed in the future for social reasons than we currently do under the income tax. >> you should look at the report that had the courage to put that out there. we felt that because of the resolution in the senate that we would be raming our heads into the wall. >> let me just say on this point -- exercise the privilege of the chair for a moment. i argued strenuously for a vat tax or a consumption tax to be part of the package. i did so in part based on the recommendations the commission received. we brought in the best tax experts in the country, republicans and democrats, progressives and conservatives. their recommendation was to go to a part income tax, part consumption tax system, not
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later one on top of the other, but displacing part of the income tax system so that we could lower rates, especially corporate rates, to help america be more competitive. we had a proposal to adopt a is a hybrid system, with part of it being consumption tax, and to take 100 million americans off of income tax rolls completely. 100 million americans would no longer have to file income-tax returns at all, and you would achieve the same amount of revenue, but you would do it with a hybrid system. we understand the politics of it, but i did want to take this moment to explain the position that debt least i took.
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>> i want to thank both of you for your service. on behalf of the people of ohio, most reports and debt collecting dust on a she somewhere, and there is an opportunity -- end up collecting dust on a shelf somewhere, and there is an opportunity year to really change the direction of the country. it depends on what congress does. alan simpson inspired me to take a shot at a elected office, which means you will be blamed for something additional now. that witness protection program will have to be even better. erskine, and thank you courier service. when you were chief of staff at the white house -- thank you of for your service. when you were chief of staff at the white house, we did some
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work together. i recall your willingness to step aroun partisanship and come up with solutions, and that is what you have done in this report. thank you. i have three quic questions, just to get your thinking. two we have discussed briefly, a tax reform and social security. on tax reform, quickly, do you think from the testimony you have heard, that the proposal you have will not just have the impact that the committee would indicate from the scoring, but will also make our economy more competitive? >> yes, without question. >> that is an intangible that is really not represented in the numbers you are providing. on social security, we will hear later today, and we have heard all along, that social security is not adding a dime to the deficit and is in good financial condition.
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do you agree with that? >> is $45 billion cash-today and expected to stay cash negative for the foreseeable future. >> that is based on the congressional budget office report? >> yes. what some people that sometimes forget is that when somody my age goes to collect social security, and i want money, cash. i present that obligation to the social securittrt fund, and it does not have cash. what it has is a government i owe you, and the government has to go out to the marketplace and borrow the money, so it increases the national debt. in essence, since half the money is borrowed from foreign countries, at least half of the money i am getting is coming from some foreign country to pay my social security.
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>> that is a very good way to put it. i am glad you addressed the issue in the report and also talked about it today. the finalne is the toughest of all. what is the economic impact of this? if we reduce discretionary spending it will result in job loss. that is a keynesian model, where government spending being reduced = less economic activity. these people looked up the stimulus package and said that $800 billion would cause unemployment to be 8% last year and 7% this year. that has not happened, but now they're saying that if we reduce spending by 1.6% that you mentioned earlier, that there would be a great loss of jobs.
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you looked at this carefully, and earlier you talked about the financial crisis, small businesses being starved for capital if we do not do something. what do you think the economic imct would be of reducing spending along the lines the u.s. recommended? >> i am not an economist, and do not want to pretend that i am. i am a pretty good business guy. i can tell you from getting the small business administration that small businesses cannot grow, you cannot create jobs, without money. and if we do not tackle this fiscal mess that we have today, then small businesses will be crowded out of the marketplace and there will be fewer jobs, not more jobs. if you are really concerned about jobs, then have to tackle this sysco problem head- on.
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and we did -- this fiscal problem head-on. >> and we did consider throughouthe fragile nature of the economy. when you are all through when -- when you're all through with what we have done, i do not thk people will say this is a failed commission like all commissions. we did two major pieces of legislation on legal immigration and illegal immigration, and brought two 0.9 million people out of the dark to obtain legal status in america. i was on the iraq study group. that was not a failure. 50 plus of those recommendations have been adopted. this is not going away. this is a stink bomb at the garden party.
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>> thank you a for your work on the commission. i want to ask some questions about an area i do not think anyone has touched on. if they have, i apologize. addressing the health care provisions and the deductibility for businesses of the costs they spend on health care, you have laid it out that the deductibility is limited to the 76% in 2014 and then will be phased out over the following -- percentile in 2014 and then will be phased out over the following 20 years. employees will pick up a lot higher copays, a lot more of their insurance and so forth. that sounds an awful lot like an immediate and very regressive
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tax on working americans. i wonder if you could touch on not for a moment. -- on that for a moment. >> i do not think that is the case. i mean, what i think you will see is, first of all, every business in the world, whether it is a small or large business, has raised the deductible rate, the copiague, reduced the pay, its -- raised the copiagu- reduced the benefits, in order to meet their costs. that is a fact of life the we have all had to live with. i do not think businesses want to do it. but we have been forced to do it. if we do nothing, if we take the ostrich theory, we will see that continue into the future. health care is the biggest single problem that we face from a fiscal viewpoint.
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if you just look at medicare and medicaid, it is about 6% of gdp today, and it is going to go to 10% before you know it. that does not even count the dollar sign276 daily -- down to $276 it takes to fix the class act. we think we have to stand up to that, and we have proposed some pretty aggressive proposals. we haven't addressed the things we felt were responsible in order to -- we have have addressed the things we felt were responsible in order to meet the fiscal challenges. we have made promises and we of not delivered on them. >> in normal business, you
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increase costs to workers or that benefit is likely to decrease. they have increased the share being picked up by the employee. the other reason i am concerned about this is that in the context of health care reform, of companiespresmise continuing to provide health care. if indeed you set up a situation where employers say, without the tax deductibility of these benefits we are simply going to shut that down. we will provide benefits and other ways, that results in a huge shift, actually increasing the size of the deficit. i am wondering if you have modeled this out into the future. it sure looks like something that is going to increase public deficits and public debt into the future, rather than reducing
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them. >> this is a monster, and we could not even wrap our arms around it. that is where health care is. all you have to do is look your own family or the family down the street for the last 10 years of your life. in two weeks, you can run up a bill for $400,000. that is just in wyoming. there is a way to do this. you cut the riders, and you reduce physicians' fees. you increase co-pays and you get one set of books in the hospital, and you do tort reform. you do not want any of that. but leave them like -- leave it
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like it is, and you will see a giant hole in the discretionary budget. >> the house passed a bill to exemption fromtthe antitrust. there was a lot of discussion of public option. my colleagues in rhode island said it increased costs. it the ability to negotiate the price of drugs. many approaches other than a short-term transfer onto working americans. >> thank you. welcome back. you did a terrific service with
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your work. although i did not agree with every piece of it, it was a body of work that i think was exceptional. i think you gave us, if we want to follow it, a pathway to start to get this fiscal situation under control. because you were attacked by both the right and the left, i assume you were trying to find a spot right there in the middle that might be able to attract the level of support that might be necessary to actually enact something around here. i do want to ask a couple of questions, and i think it has been talked about a little bit already, but maybe you can elaborate. if we were to adopt the president's budget -- it did not address what many of us thought it should have, which were these issues of title meant reform. if we were to adopt the -- of entitlement reform. if we were to adopt the president's budget, how does that address the long-term issues that you have identified
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in your work? some of the recommendations included in your work seem to be absent fro the president's proposals. >> i can answer that pretty straightforwardly. first of all, i do not think anybody on our commission agreed with every part of the commission report. i sure didn't. allen didn't. i know the chairman didn't. we all held our nose and swallow it some of the things in the report for the good of the country. again,sident's budget, as i said earlier, does a relatively good job of dealing wi domestic discretionary spending cuts. it does not step up to nearly to the extent i believe it should with the defense cuts that are necessary or the cuts that are needed in health care or reforming social security so that it is solvent for the next
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75 years. much like the republican response which, both of them are just like budget efforts -- light budget efforts. >> alan greenspan recently said that the u.s. could face a bond market prices if politicians do not start acting soon to cut the nation's debt. he said the probability of that happening is 50%. do you agree with that assessment? >> do not know what the percentages, but let me tell you how crazy our situation is today. we have this treaty where, if china were to attack taiwan, we are supposed to support taiwan's. the only problem is, we would have to borrow the money from china in order to do it. this is a real mess we are in today. we can either take the ostri
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approach and put our heads in the sand, or we can step up and decide we're going to do something about it. but i can tell you, bankers are not going to continue to finance something where they're not sure they're going to get paid back. they will cut you off. we are borrowing half of our money from foreign countries. >> how do we translate that? a lot of times we talkedbout these things in the abstract that. of translate that to the american people, personalizes -- how do we translate that to the american people, personalize it, so that they understand what the impact of our not acting are? a lot of times they react to this program being cut or this prram bein cut. it is harder, once you focus on the specifics, to get the support you might get when you're talking in general terms about the need to reduce spending and debt. what does this mean to the average american family if we do not take steps to fix this mess?
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>> senator thune, they have already got it. we used ask how people were having as a kitchen table. i will tell you how they're handling it. they do not need any charts, nothing. they just say, if you spend more than you earn, you lose your but. if you borrow $0.40 on the dollar, you must be stupid. they understand this. that is all you have to say. you're borrowing $0.40 for every but you spend, and they know that if they did that in their own house, they are out in the powwows. it is over. they get it. >> thank you. back thealth care for a minute, health care consumes
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about 18% of america's gdp right now. the closest country is at 12%, the workers. so we are half again as bad as the worst cntry in terms of the efficiency with which we deliver health care. we do not get better outcomes for it. the te of increase is accelerating. we have a real problem on our hands with health care, and it is not just an entitlement problem. it is a health care system problem, because the cost increases are clobbering the private sector just as strenuously as they are clobbering the public programs. so, io not think we can entirely fix the health care system just by is trying to cut benefits in the health care programs. there is an underlying cost problem in our health care
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system that i think has a lot to do with our rube goldberg design of the health care system, although it is worse. ruth kohlberg was accidental. in this diagram, every party has a motive. i think there is a lot of work being done to try to correct and reform the system as it goes. the areas that are obvious are the quality improvement movement out there. we spent $2.5 pas in billion a year treating what should be completely avoidable hospital infections. a really robust information chnology platform could make a huge difference and frankly, generate new private industries. we could start paying doctors better for resul instead of just for amassing as many
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procedures as possible. the overhead could be driven down a lot. there's a great deal of overhead the goes into the totally unproductive warfare between insurers and doctors over getting paid. they now have armies of consultants and staffers to fight with each other ever getting paid. that is all on the health care system and it does not provide a nickel's worth of health care value. stack of those up and there is quite a lot going on. big out its very pursuing this stuff. reject staff, all of those up and there is quite a lot -- stack all of those up and there is quite a lot going on. there are some very big outfits pursuing this stuff. thpresident's health care reform is estimated to save $700 billion a year.
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some have calculated it higher. it looks like a really big number. if you agree with this, i would urge you, as you areiscussing this issue, to really focus on this question of delivery system reform and the win win it so that it is possible to improve care, improved efficiency, and lower costs. the one big flaw is that cbo and omb cannot predict it because it is a process of learning and experimentation. we know there is good stuff to be done out there. we can have confidence in our ability to get there. we cannot predict the dollars. when you get down to a budget discussion, my fear is that this incredibly significant oppounity gets shoved off the table because nobody can put a dollar figure on it and you all
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are generating a report it that needs to be able to put a dollar figure on it. i guess my appeal is, do not give up on that just because it is not possible. it is probably -- it is not costable. it is probably the biggestnd best thing we can do for our worst fiscal problem, which is the health care system. even if you put it in as a footnote saying, we cannot measure this, but it has a huge potential and we should focus on that potential. it worries me we are not getting that. probably one of the bes people in the world on this is under constant attack right now because he did not come here and get confirmed proper. let's not throw that out with the bathwater because we do not
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have a number. it starts to seem like an ok idea. i urge you to consider that going foward. it is so important. i hope if you agree you will give it a little more air time. >> i actually do agree. i was vice-chairman of the medical center. after that, i had it the north carolina public health care system. it is un scorable. that is why it is not in our report. >> we have a bipartisan group.
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we worked for months. the problem was -- you go to the floor and get an amendment. it was something good. >> thank you. alec like to thank both of you for putting forward a serious proposal. it is essential we mobili the american public so we understand how urgent the problem is. we hear this term "debt crisis"
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all the time. can you explain what that will feel like and how it will affect and enter -- and individual. what will it do to a family? >> interest-rate costs will rise relatively rapidly. the quality of education that they can provide will erode. the university system's will a evaporate. the likelihood of that creativity is less likely that there will be a new job. there is a likelihood the training funds will be there. their roads and bridges and highways will be ls.
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the guy they get hurt the worst will be the little guy. that is here is going to get hammered. >> said nothing we can make that. we talked about it solvent. did you fix that on a cash flow basis? >> we did a couple of things. on the revenue side, we raise the minimum that someone would be taxed to fund. it will grow to 168,000 by 2020. the ticket to 190,000.
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he paid that on the differential. we reduced the rate of growth in benefits being paid to people at the higher levels. we changed the been raped. the bin rates we changed the cpi. >> to account for the fact that 2.5 trillion dollars she raised. >> it has to be. >> you are proposing we raise it to 21% of gdp. we never had 21% in gdp. we hit it close three times. i kind of subscribe to the law. did we are going to be about
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18.8 durum. how the overcome that? -- 18.8%. howdy you overcome that? >> i looked at the forecast. revenue was forecast in 2020. spending was about 25% of gdp. i've had to figure out how we would close this gap. i wanted to close the vast majority on the spending side. i wanted to get to a balanced budget. historically, we have always balanced it at a level below 2 of gdp. i thought that was the maximum level we could get to. i thought it was one of the lowest levels we could get spending too. >> no matter what the rates, we
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never raised 21%. >> that should be the maximum level. >> one final question, i do not subscribe to the idea that has to be comprehensible reform. the american people want to understand what we are trying to do. did you make any attempt to prioritize the components of this? did you prioritize the other recommendations? >> we did social security separately. we that we rid doing it f 75 years. we did not prioritize the others.
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>> thank you for taking on this thankless task. i thi all of us agree that we are in a deficit crisis. i would welcome this further. i am convinced that if we do not tackle this, the consequences are drastic. i want to thank you for tackling these areas. tax code reform is the piece i'm going to focus on. it is my hope that if we may be
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significant changes there would be greater growth in the possibility for a greater%. please tell me three things. give us a little more detail about how it might unfold. how would it unwind it? how do we stay on top of when it will happen? there is a reemergence of a lot of tax expenditures. some would prevented from then of being undone.
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>> these are our colleagues. senator dear banquette asking where the tipping point was. we kept saying, we do not kw. some say two years. some say three. it all depends on how far the congress goes in getting to the meat of reducing a $14 trillion in debt.
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people are not going to be patient. he did not have the guts to do anything it did not do what you are supposed to do. we will take care of ourselves. there are not in people. >> we did a couple of things. we put a failsafe on the tax side.
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the deficit to gdp was greater than primary balance. the president had to submit a proposal. this w by 2015. this is why we went with that. if it became on stabilized, it began to grow again. on health care cuts, we have -- we did not just willy-nilly say there ought to be cuts in health care. we have eversingle cut bought and paid for. i had to gore my own to do this.
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we took away some of the church. . >> i want to close by taking -- by thanking you for your hard work. thank you. >> five minutes is a whole lot of time. i would like to maybe ask a few
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questions. we just focused on deficit reduction. it is as significant an issue as it is. we lose the context of what it is. the other reality that is happening is that the middle class has been colpsing. poverty has been increasing. we now have the most unequal distribution of wealth and income, of any major country. while poverty increases, the wealthiest people have become wealthier. we have a situation where the top 400 families in america on more wealth than half of the families in america. you have the top 1% earn more income than the bottom 50%. when you talk about moving toward deficit reduction, on
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whom should that burden floor? she really third 200,000 children off of it? surely cut back on the social security administration? to cut back on programs? how do you deal with that? i'm going to have to get to social security and health care. at a time only have such a grotesquely an equal distribution of wealth, 80% of all income -- why would you suggest that 3/4 of the movement comes from spending cuts and only 25% from revenue? why disney as the wealthiest people to start paying tax --
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why didn't you ask the wealthiest people to start paying their fair share of taxes? >> we have a spending problem. in every single case, we tied to protect the disadvantaged. if you look at the other cuts, about 20% -- we did not touch a single one of those. tax expenditures actually go to those people. why do they do that? they have all these tax
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expenditures. we got rid of the tax expenditures. that is whyt is about 155,000. >> that is the right thing to do. >> a thend of the day, three- quarters of your plans talks about cutting spending. how you feel about throwing it off? >> when you talk about cuts in spending,. let me go on. >> what about your present offering to cut it? >> i did not do that. it is a terrible idea. >> let me go to social security. social security has been an enormously successful program for the last of me five years. it has taken elder people out
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of poverty. it paid out eve nickel owed. you said when we do not put social security, we did not do it from a deficit of you. president obama also had an idea. his idea was to raise the taxable level. >> i have said i do not think people in my in come back the date in my income bracket -- i'd have said that i do not think people in my income bracket need a tax cut.
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>> i agree with president obama. to benefit the thousands of dollars -- to render a thousand dollars must be removed. -- $250,000 must be removed. i asked a fairly simple question. do you agree with president obama backed above $250,000 we should remove the cap? a tactical income for social security. -- of taxable income for social security. the president went a lot further than you did. >> we to get to 90%. that is what it originally was. in 2020 into the going to 168,000 -- the president says he will pay taxes on it.
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>> the president said that we should start very shortly by removing the cap for people over 250? like i'm happy to give you my opinion. the united states spends almost per capita on health care than any other nation. we are the only nation that allows it to pay a significant role in health care. other countries have natiol health care programs. would you suggest that one way to lower the cost is to eliminate it? >> you have now gone over. we have tend it there. >> when there is a flow of a
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conversation, i permit both sides to go over a minute over. now we are two minutes over. let meo to a point that senator johnson raised. it is critically important. we discuss this in the commission. if we use the revenue, at no time in the last 40 years with we have balanced the budget. i do not think that is going to work. if we lookt the five times the budget has been in surplus, what has been the revenue? it is nearly 20% of gdp.
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2001, 19.5%. we had a different circumstance we are dealing with. it is the baby boom generation. it'll double the people eligible when we looked at that, and we are at 25% of gdp. we have decided that we had to do more on the spending cut side, substantially more -- we also had to do something on the revenue side of we are going to build it in a fair way. we are borrowing of 40 cents of every dollar we spend. if we did that, we would have to cut every single thing. social security, 40%. medicare, 40%.
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i do not think that is reasonable. there has to be some revenue in this equation. some will say revenue will return to the normal. right now, revenue is about 15% of gdp. the lows it has been in 60 years. it is the lowest it has been in 80 years -- very close to being the lowest it has been in 80 years. we will get back to cse to the average. we know there is a return to the mean. we see it all the time. we have to have some revenue. much more has to be done on the spending side.
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i want to end my questioning without a question. thank you. his wife is spectacular. you have proved it. you have worked together. there are all kinds of things in here that i n predict that i disliked intensely paper -- i
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disliked intensely. the only thing worse than being for this is being against this. the country is in deep trouble. there isot a single person that can tell you they know with certainty when we will hit it. we are hurtling ward it. whateverear ideology, i put mine on the back burner. as much as i dislike it, what
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matters to the country is getting a result. failure is not an option. we will continue to pursue bringing this government's to fiscal sanity. i have no doubt that we need this year. i do not think it dopatta as an economic slowdown. think they can be done. it will add up to over $800 billion. let's get busy now. i did not shut the door on entitlement reform.
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they are unsustainable. i think the financial markets will respond if we put ourselves on the course. you have given us good suggestions. let's see if we cannot make some progress. i look forward to your leadership. thank you for your contribution you have done something very important. i hope the country is paying close attention. >> thank you for your consistency. you came here when i was here. you step with your guns. 8 if we can just remember one
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thing, we are americans first the republicans a -- or democrats. if we cannot remember that, we cannot get out of the rut. >> of men. thank you. [captioning performed by national captioning institute] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] ned>> we have to do this as a
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comprehensive package. it is breaking its up. we are barring 40 cents of every dollar we spend. you have to have a comprehensive package. manyf our colleagues do not believe that you can do this. i can do this tonight. the floor is a side show. are u in line with what they are doing? >> on many occasions, there is an amazing disconnect. you are only dealing with 12% of
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the budget. they are dealing with 12% of it. as a result, it cuts there. it is truly draconian. bid does not deal with the real problem. that is the threat. $60 billion does not touch it. they are not dealing with the vast majority of the budget. it makes no sense. >> you have talked about having some sort of summit at the white house. have you gotten anywhere with that? are they leaving this in any way? i do not see how this old simile get them without some type of a negotiation with the president or his representatives are at the table. are at the table.

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